Commodity. Soda ash prices rise as demand gains on economic recovery

Among the slew of commodities that have gained this year following economic recovery, soda ash – also known as sodium carbonate – is one with its prices rising over 70 per cent since the beginning of the year.

According to the Trading Economics Website, soda ash, which is widely traded on spot in Europe and Asia, soda has increased by 972.5 yuan (₹11,150) per tonne this year to 2,312 yuan (₹26,475). This is based on a contract for difference (CFD) trading that tracks the benchmark market for this commodity.

Economic recovery across the globe has pushed up demand for soda ash, which is used among others things in glass production that accounts for 50 per cent of the world’s consumption, leading to the price surge.

Soda ash is widely used in the manufacturing of glass as it helps in regulating the temperature of the furnace to attain stability. Besides, it is used in soaps, detergents, chemicals, metallurgy, pulp and paper.

‘Steady rise in prices’

US-based Ciner Resources, world’s largest natural soda ash producer from Trona ore in Wyoming, said during the presentation of its second quarter results that “(soda ash) sales prices globally are steadily rising due to a tightening market and higher costs”.

During the second quarter, Ciner said it saw economic recovery continuing from the Covid-19 pandemic resulting in more soda ash production. In its annual report for 2020-21, Tata Chemicals, said soda ash demand, after being hit during the Covid-19 pandemic, recovered by last year-end and the recovery continues sequentially across all application sectors.

Tata Chemicals, a subsidiary of the Tata Group, is one of the largest producers of soda ash in the world, apart from Nirma Ltd. The rise in soda ash prices has helped the company’s stocks to rally by 200 per cent in the past year. Since the beginning of this year, the stocks have gained 85 per cent.

Flat glass recovery

The economic recovery resulting in a rise in soda ash uses was confirmed by Belgium-based global chemicals firm Solvay S.A. Commenting on the second quarter results this year, it said soda ash sales were up eight per cent on continued recovery in flat glass.

Market research firm IMARC Group said, “The economic recovery may result in an increase in demand for sodium carbonate (soda ash) which is used, among others, in the glass production.”

The increased use of glass packaging solutions in the food and beverage, pharmaceutical and personal care industries is also strengthening the market growth in this segment, it said, adding that the market would witness a compound annual growth rate of four per cent during 2021-26. The soda ash market value was pegged at $17.8 billion last year with the annual production estimated at 55 million tonnes (mt).

Chinese-led recovery

Ahmedabad-based Nirma Limited, a well-known player in the detergents market and another major soda ash producer, said in its annual statement that demand for soda ash is expected to increase during the coming years on the back of healthy consumption from the glass segment.

The recovery this year comes on the heels of world demand declining 5.4 per cent last year, equivalent to 3.3 mt, said Tata Chemicals. The company said that the trade shrunk to 15 mt from 16.6 mt due to Covid which affected demand and supply chains.

The price recovery has been led by Chinese growth, though it was delayed in other parts of the world, where companies tried to cut their inventories.

Other pressures

Tata Chemicals said demand in India, too, was affected during the initial months of lockdown due to lower consumption by glass and chemical industries. The detergent sector, another major consumer, remained resilient, though.

“The market was also under pressure due to high pipeline inventories and imports that led to supply-demand imbalance. Imports also put pressure on domestic prices for a major part of last year,” the Tata Group subsidiary said.

On the recovery, Ciner said it sees demand strengthening continue but the rising cases of Delta variant coronavirus posed a risk. It said exports were impacted by high ocean freight rates and low availability of vessels, affecting exporters’ profitability. The firm, however, said that it was optimistic of continued sales price recovery.

Growth prospects

Analyst firms said demand for soda ash is being driven by rising construction in emerging economies, particularly in the Asia-Pacific region. The chemical is also being used for air purification and water softening as environmental concerns rise. China and India are the major consumers of soda ash with their construction, glass, paper, textiles and cleaning chemicals being the major consumers.

In water, soda ash can control the pH value and it is the main reason for its extensive use in the water treatment sector. Growth in use of liquid soaps and detergents are also seen leading to higher demand for soda ash, which some analysts say could see four per cent CAGR growth to 2030.

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